U.S. Files Antitrust Suit to Stop AT&T, T-Mobile Merger

The U.S. Department of Justice has filed an antitrust lawsuit to prevent AT&T from acquiring one of the nation's other major mobile service providers, T-Mobile.

AT&T and T-Mobile are two of the four providers — Sprint and Verizon being the others — that control more than 90 percent of the market. The DOJ statement says that the acquisition would "substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services in their everyday lives."

The suit was filed in the U.S. District Court for Washington, D.C.

AT&T announced in March that it planned to purchase T-Mobile from Deustche Telekom for $39 billion in cash and stocks, a deal that would give it 130 million subscribers and push it past Verizon as the nation's top mobile provider.

The DOJ complaint indicates that the problem is not just the number of subscribers each company has, but the scope of their carriage. They compete nationwide in 97 of the 100 largest cell phone markets. Regional providers simply do not have the ability to compete with the national networks.

"Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation’s wireless carriers, particularly the four remaining national carriers," Deputy Attorney General James M. Cole said in a statement.

At the time, the companies estimated it would take a year to clear all of the regulatory and bureaucratic hurdles. Even if the suit goes their way, the wait may be even longer.

Wayne Watts, AT&T's Senior Executive Vice President and General Counsel, expressed his frustration in a statement released in response to the DOJ's decision.

"We are surprised and disappointed by today’s action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated," Watts said.

However, he also indicated that AT&T will continue to aggressively push for the merger.

"We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed. The DOJ has the burden of proving alleged anti-competitive effects and we intend to vigorously contest this matter in court."

However, analysts have already declared the deal all but dead. For a good look at what many of them have to say, take a look at this Wall Street Journal blog post.

Furthere dampening the mood were the drop in stock prives for the companies involved, and a statement by the Federal Communications Commission.

The FCC has also been looking into the potential acquisition and after the DOJ announcement it released a statement from its chairman, Julius Genachowski.

"By filing suit today, the Department of Justice has concluded that AT&T's acquisition of T-Mobile would substantially lessen competition in violation of the antitrust laws," Genachowski said. "Competition is an essential component of the FCC’s statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition."